H-BOMB THREAT, DOTARD

North Korea has threatened to detonate a hydrogen bomb in the Pacific, after Kim Jong Un warned that Donald Trump would “pay dearly” for his threat this week to “totally destroy” North Korea if America was forced to defend itself and its allies.

North Korea’s foreign minister likened President Trump to a “dog barking,” ridiculing the American leader for threatening to “totally destroy” his country if it persists in its nuclear and missile threats.

“Back home, we have a saying: The dog barks, but the caravan continues,” Foreign Minister Ri Yong-ho told reporters in New York on Wednesday when he was asked about Mr. Trump’s comment. “If he thought he could scare us with the noise of a dog barking, well, he should be daydreaming.”

China’s central bank has told banks to strictly implement United Nations sanctions against North Korea, four sources told Reuters, amid U.S. concerns that Beijing has not been tough enough over Pyongyang’s repeated nuclear tests.

Steve Bannon flew to Beijing last week for a secret meeting with the second most powerful Chinese Communist party official, less than a month after the former chief White House strategist declared that America was at “economic war with China”.

According to one person in China familiar with the situation, Mr Bannon travelled to Beijing to meet Wang Qishan, the head of the Chinese Communist party’s anti-corruption campaign. The meeting occurred at Zhongnanhai, the Chinese leadership compound, after Mr Bannon had visited Hong Kong to give a closed-door speech at a big investor conference hosted by CLSA, a Chinese state-owned brokerage and investment group.

Two developments are accelerating the effort: Key Senate Republicans reached a tentative deal this week to allow for as much as $1.5 trillion in tax reductions over 10 years; and there is a growing willingness within the GOP to embrace controversial, optimistic estimates of how much economic growth their tax plan would create.

For Puerto Rico, long crippled by enormous debt and an essentially bankrupt financial system, the road to recovery just went from long to seemingly endless. Still reeling from Hurricane Irma, which knocked out 70 percent of the power when it grazed the island two weeks ago, it faces a mountain of need in the coming months just as the federal government is stretched to the limit grappling with the destruction left by Hurricanes Harvey and Irma.

And unlike Texas and Florida, politically powerful states on the mainland, Puerto Rico is an impoverished, Spanish-speaking commonwealth. It is an island to boot, making aid delivery all the more cumbersome and expensive.

PRIVATE JETS

The frequency of the trips underscores how private travel has become the norm — rather than the exception — for the Georgia Republican during his tenure atop the federal health agency, which began in February. The cost of the trips identified by POLITICO exceeds $300,000, according to a review of federal contracts and similar trip itineraries.

Five years ago, Paul Manafort arranged for a prominent New York-based law firm to draft a report that was used by allies of his client, Viktor Yanukovych, the Russia-aligned president of Ukraine, to justify the jailing of a political rival. And now the report is coming back to haunt it.

Former colleagues of Sean Spicer tell Axios that he filled “notebook after notebook” during meetings at the Republican National Committee, later at the Trump campaign, and then at the White House.

When Spicer worked at the RNC, he was said to have filled black books emblazoned with the party’s seal. Spicer was so well-known for his copious notes that underlings joked about him writing a tell-all.

One source familiar with the matter said that the records were just to help him do his job. “Sean documented everything,” the source said. That surprised some officials of previous White Houses, who said that because of past investigations, they intentionally took as few notes as possible when they worked in the West Wing.

Special counsel Robert Mueller has sought phone records concerning the statement written aboard Air Force One defending a meeting between Trump campaign officials and Russians at Trump Tower last year that was set up by Donald Trump Jr., according to two people familiar with the investigation.

FACEBOOK INQUIRY

Facebook, under fire for its response to Russian activity on its site before the U.S. presidential election, agreed to hand over detailed information on thousands of Russian-backed ads to congressional investigators.

In an announcement on Facebook, Mark Zuckerberg said the company would make changes to ensure political ads on its platform are more transparent. Calling it “maybe the most important step we’re taking,” Zuckerberg pointed out that political ads online are not regulated to the same extent as ads on mediums like TV. The Facebook CEO said, in those cases, you still can’t be sure if you’re seeing the same ads as others.

CHINA CREDIT RATING

S&P Global Ratings cut China’s sovereign credit rating for the first time since 1999, citing the risks from soaring debt, and revised its outlook to stable from negative.

The downgrade, the second by a major ratings company this year, represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.

The downgrades of China’s rating by two agencies in four months suggest Beijing is failing to convince the world of its economic sustainability, despite the rosy economic picture it likes to paint.

The latest downgrade came despite Beijing reporting “stronger-than-expected” growth of 6.9 per cent in the first half of the year, improving the profitability of its indebted industrial sector, engineering a noticeable appreciation in the value of the yuan against the US dollar, and stemming the outflow of capital funds.

China’s latest rating cut won’t take away the punch bowl, and investors are likely to keep lapping up debt of the nation’s companies at an unprecedented pace.

“S&P’s is more of a catch-up rating action,” said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings Ltd. “There should not be much impact on credit markets. A+ is still a solid investment grade rating. There is no material information in S&P’s release that the market was not already aware of.”

RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS

Even before Toys “R” Us filed for Chapter 11, more large chains had declared bankruptcy this year than any since the recession. Moody’s now rates 22 retailers and apparel companies as distressed, more than during any point of the financial crisis.

The standoff over Lutheran provides a window into how CHS, once the largest for-profit hospital chain in the U.S., has allowed facilities to languish, possibly compromising care and destroying investor value in the process. Smith presided over a decade-long acquisition binge that saddled CHS with total debt of almost eight times its earnings and a network of underperforming facilities.

The company lost $2 billion in the past six quarters, during which doctors from Key West to Spokane have accused the chain of pinching pennies and regulators have fined it for overcharging Medicare. Says Indiana Republican Representative Jim Banks, who’s sided with the Fort Wayne doctors: “It’s buy, squeeze, and repeat.”

Non-financial companies’ liquid assets, which include foreign deposits, currency as well as money-market and mutual fund shares, reached a record of almost $2.3 trillion in the second quarter, according to Federal Reserve data released Thursday. That’s up nearly 60 percent since the recession ended in mid-2009.

MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS

Facebook was simply not built to handle problems of this magnitude. It’s a technology company, not an intelligence agency or an international diplomatic corps. Its engineers are in the business of building apps and selling advertising, not determining what constitutes hate speech in Myanmar. And with two billion users, including 1.3 billion who use it every day, moving ever greater amounts of their social and political activity onto Facebook, it’s possible that the company is simply too big to understand all of the harmful ways people might use its products.

The criticism is that the tech groups are becoming as powerful, and important to the economy, as the state-owned enterprises they are trampling over. This, at a time when the climate in the country has changed markedly, with President Xi Jinping’s campaign to purge corruption and reduce systemic financial risk and, in the process, consolidate enough power to control his own succession.

China’s internet companies touch more aspects of people’s lives than any other sector. But they’re ill-prepared for the expectations of social responsibility that come with their influence and power, say industry experts and social activists.

In what’s emerging as a nascent line of market research across Wall Street, investors are attempting to puzzle out how passive investing creates opportunities—or pitfalls—for individual stock trading. They are looking at factors such as the percentage of a stock owned by index funds and money flows into and out of such funds as they size up whether to buy or sell shares of a company.

This new type of analysis shows how the rise of passive investing—tracking a basket of securities rather than picking individual ones—is changing the makeup of markets. Even active investors are now resigning themselves to the influence of indexing and are contriving ways to take advantage of its impact.

The culmination of these technologies — autonomous electric cars available on demand — could transform how people travel and confound predictions that battery-powered vehicles will have a limited impact on oil demand in the coming decades.

Most forecasters see the shift away from oil in transport as an incremental process guided by slow improvements in the cost and capacity of batteries and progressive tightening of emissions standards. But big economic shifts are rarely that straightforward, said Tim Harford, the economist behind a book and BBC radio series on historic innovations that disrupted the economy.

“These things are a lot more complicated,” he said. Rather than electric motors gradually replacing internal combustion engines within the existing model, there’s probably going to be “some degree of systemic change.”

The UK is now experimenting on itself for the benefit of humanity. Advanced societies rarely do anything so reckless, which is why the Brexit experiment is so valuable. In between self-poisonings, Brexit keeps producing discoveries that surprise both Leavers and Remainers. Here are some early lessons for other countries. These lessons come too late for the UK itself, so please consider them our selfless gift to the world, like football.

For those who care to look, the signs are everywhere. Brexit is dissolving Britain’s status in the world. The effects are not subtle. They are as demonstrable and obvious as a lack of leaves in winter. The only reason they are not more widely discussed is because the UK press is so fully behind the project.

The BBC news reports on Theresa May’s speech to the United Nation yesterday did her the considerable service of staying close on the lecturn and only occasionally cutting away to the face of Priti Patel and Boris Johnson in the auditorium. If they had panned out, we would have seen that the hall was largely empty. No-one had bothered to come.

Don’t kid yourself that it was always this way. It wasn’t. And don’t kid yourself that this is about Britain’s relative size in the world. It isn’t. French leader Emmanuel Macron secured a sizeable audience for his speech. This is the natural reaction to a country which seems to be actively trying to make itself irrelevant.

CENTRAL BANKS & MONETARY POLICY

Nearly a decade after the Federal Reserve embarked on an unprecedented effort to shore up the collapsing American economy, the central bank said on Wednesday that it would begin withdrawing some of the trillions of dollars it invested in the wake of the 2008 financial crisis.

The decision, while widely expected, is nevertheless a significant sign that the Fed is confident that economic growth and low unemployment will continue. In other words, the central bank believes that the American economy has emerged safely from the crisis.

The total net worth of U.S. households pushed farther into record territory, climbing by $1.7 trillion in the second quarter of 2017, to $96.2 trillion. The increase was smaller than the $2.3 trillion advance in the first three months of the year, but marked the seventh straight quarter overall wealth rose in the U.S.

A meticulous planner, Ms Yellen has been preparing the exit from quantitative easing since early this year, and it would have taken a wreck in financial markets to dislodge her from her well-telegraphed intention to start the process this autumn. The process of reducing the $4.5tn balance sheet would start in October, the Fed announced, leaving it to run steadily into the next decade.

The US Federal Reserve’s decision to begin paring back its $4.5tn balance sheet is a milestone in the global retreat from crisis-era stimulus. It is a declaration that the central bank is back in the realm of “normal” monetary policy. Yet it is far from clear what normality now consists of: the old links between jobs and wages, growth and inflation, no longer seem valid. So while the gradual reversal of quantitative easing is appropriate, the Fed’s signal that it expects to stick with plans for further interest rate rises, despite the lack of inflationary pressure, is baffling.

Hewlett Packard Enterprise Co. is planning to cut about 10 percent of its staff, or at least 5,000 workers, according to people familiar with the matter, part of a broader effort to pare expenses as competition mounts.

GLOBAL ECONOMY DATA

“Low oil prices, structural reforms, and robust demographic growth should have made India the brightest story of emerging Asia,” said Trinh D. Nguyen, senior economist at Natixis SA in Hong Kong. “But bumps on the road are derailing India’s path to success, at least in the short-term,” she said, adding a “strong rebound” should follow.

FOREX, CRYPTOCURRENCY, EXCHANGE IMPACTS

The strong euro is taking a bite out of European earnings, with the region’s companies bracing for more pain in the coming months and searching for ways to protect their bottom line.

The strong run of the European Union’s single currency against the dollar and a host of other currencies has surprised many executives. The euro has risen 12% against the dollar since early April, trading Wednesday at $1.20.

ENERGY CRUDE OIL, OIL SANDS, SHALE

Saudi Arabia’s King Salman plans to discuss Syria, the Qatar blockade and oil production with Russian President Vladimir Putin next month in Russia, according to people familiar with the matter, as energy cooperation deepens political ties between the two former foes.

A decade’s worth of efforts to cut oil consumption in industrialised countries is at risk of being reversed, as low fuel prices boost demand and send motorists flocking back to larger gas-guzzling cars.

Figures from the International Energy Agency and other forecasters show OECD oil demand, which declined between 2005 and 2014, has been growing rapidly for the last three years after oil prices crashed from above $100 a barrel to about $55 today.

If the trend continues, roughly 62 per cent of the reduction in OECD oil consumption since 2008 will have been reversed by the end of next year, despite governments targeting fuel efficiency, alleviating air pollution and cutting reliance on foreign crude.

ENERGY RENEWABLES, NUCLEAR

Elon Musk took a lot of heat last year when his Tesla Inc. bought solar-panel installer SolarCity for $2 billion. The synergies between his two companies didn’t seem immediately obvious, among other issues, critics said.

But now other solar installers are looking to partner with companies as they wrestle with a market that is shrinking after 16 years of rapid growth. Their longtime sales model — knocking on doors, cold calling at home, setting up mall kiosks — has proven to be costly. Far more effective to use the umbrella of bigger established companies to find customers, they’ve decided.

“Being a pure solar company is too difficult,” said Joe Osha, an analyst at JMP Securities LLC. “Companies are rediscovering something: customer relationships are really important.”

The average tractor-trailer travels less than seven miles on a gallon of diesel, making it one of the least-efficient vehicles on the road. Spurred by pollution regulations and sluggish demand, truck makers are trying to change that.

Even small gains can have a big environmental impact. Each year in the U.S., roughly 1.7 million tractor-trailer trucks consume about 26 billion gallons of diesel. Getting an extra mile a gallon would equal removing more than 200,000 trucks from the road. It also could save trucking companies billions of dollars.

The UK government has told the financial services industry that Britain will seek to develop a distinct regulatory framework from the EU after Brexit in an effort to secure a long term competitive advantage for banks, fund managers and insurers.

EUROPE

More than a third of Switzerland is farmland, but that falls short of most other European nations: take neighboring Germany and France, where about half of the total area is agricultural land. Because of the prevalence of mountains and lakes, a quarter of the country is unsuitable for settlements and farming. Swiss voters are set to pass a proposal on Sunday that anchors food self-sufficiency in the constitution.

DACA, TRAVEL BAN, IMMIGRATION, WALL

Most Americans want Congress to continue protections for young immigrants brought to the U.S. illegally as children, and they see these so-called Dreamers in a favorable light, a new Wall Street Journal/NBC News poll finds.

The Trump administration is preparing to dismantle key Obama-era limits on drone strikes and commando raids outside conventional battlefields, according to officials familiar with internal deliberations. The changes would lay the groundwork for possible counterterrorism missions in countries where Islamic militants are active but the United States has not previously tried to kill or capture them.

PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE

The Securities and Exchange Commission’s top officials weren’t told until recently about a 2016 cyberattack that penetrated its system for public-company filings, raising questions about how the breach was initially handled.

PROPAGANDA, CORRUPTION, AUTHORITARIANISM

In the middle of Mr. Erdogan’s speech, delivered in Turkish, a man — one of a handful of protesters — screamed in English: “You’re a terrorist. Get out of my country!” The ballroom at the Marriott Marquis hotel in Times Square instantly erupted, with many attendees chanting Mr. Erdogan’s name to drown out the protesters.

U.S. President Donald Trump on Thursday praised Turkey’s President Tayyip Erdogan as a friend despite tensions between the two countries over Turkish security officials involved in street fighting with protesters during a visit to Washington in May.

ELECTORAL POLITICS

The man who has the edge to become Alabama’s next senator didn’t hedge away from his hardline socially conservative positions on Thursday, returning to his central campaign theme of a lack of godliness as a central reason for society’s woes.

Controversial former Alabama Supreme Court Justice Roy Moore warned that America was falling apart because of things like transgender troops in the military.

“Our foundation has been shaken. Crime, corruption, immorality, abortion, sodomy, sexual perversion sweep our land. When we become one nation under God again, when liberty and justice for all reigns across our land, we will be truly good again,” he said in his first and only one-on-one debate against appointed Sen. Luther Strange (R-AL).

In 2005, Moore told journalist Bill Press that he thought that “homosexual conduct should be illegal.” As of May this year, 23 percent of Americans still think that same-sex relationships should be illegal.

Whether Moore is among them is not clear; his campaign didn’t answer CNN’s question on that subject. But given that one in five Americans think that such relationships should be illegal, it would not be surprising if Moore were still among them.

SILICON VALLEY, UNICORNS, STARTUPS, VC

Benchmark’s stance could put a chill on other stakeholders who might otherwise view the SoftBank deal as a rare opportunity to cash in. Uber has generally restricted investors from such so-called secondary share sales.

RETAIL APPAREL, SPECIALTY, DINING, BIG BOX

Whole Foods will change the way companies can sell and market their products beginning next year, banning “brand advocates” from stores and pushing sellers to pitch to the grocer’s Austin, Texas, headquarters.

Amazon.com Inc. is set to open a large new office in New York City and create 2,000 high-paying jobs.

The e-commerce giant, which already has several locations across the city, will expand its presence with a 359,000 square-foot office in Manhattan that will employ people in finance, sales, marketing and information technology earning an average of $100,000 annually.

Amazon will invest $55 million in the building project on Manhattan’s west side, according to a statement from the office of Governor Andrew M. Cuomo. The space, at Brookfield Property Partner’s Five Manhattan West, will be the primary New York location for Amazon’s advertising, the real estate firm said.

Born in the ashes of WWII, the secretive German supermarket chain Aldi offers shoppers limited choices and rock-bottom prices—a formula expected to roil an American grocery market already undergoing dramatic change.

SCIENCE, NATURE, PSYCHOLOGY

A NASA spacecraft, Osiris-Rex, is speeding toward Earth after a year looping around the sun. On Friday afternoon, it will miss the planet by about 11,000 miles, zooming underneath our blue orb at 19,000 miles per hour, passing over Australia and Antarctica.

The near miss is deliberate. The Earth’s gravity will fling the spacecraft upward by about six degrees so that its trajectory will match the tilt of the orbit of its destination: a small near-Earth asteroid named Bennu.

“We’re essentially stealing a bit of the Earth’s momentum as we go by,” said Michael Moreau, who leads Osiris-Rex’s navigation team at NASA’s Goddard Space Flight Center in Greenbelt, Md.

A recent analysis of a 49,000-year-old skeleton belonging to a Neanderthal child suggests a surprising difference between them and us: Neanderthal brains appear to have grown to maturity more slowly than those of Homo sapiens.

Developing a clearer understanding of the reasons for the similarities and differences in Neanderthal and Homo sapiens growth patterns could one day help scientists better understand our evolutionary history and how we came to be as we are today.

“What we saw is that it took longer for them to get their big brains,” said Antonio Rosas, a paleoanthropologist from The National Museum of Natural Sciences in Madrid and lead author of the study, which was published Thursday in Science.

Tishby argues that deep neural networks learn according to a procedure called the “information bottleneck,” which he and two collaborators first described in purely theoretical terms in 1999. The idea is that a network rids noisy input data of extraneous details as if by squeezing the information through a bottleneck, retaining only the features most relevant to general concepts. Striking new computer experiments by Tishby and his student Ravid Shwartz-Ziv reveal how this squeezing procedure happens during deep learning, at least in the cases they studied.

Tishby’s findings have the AI community buzzing. “I believe that the information bottleneck idea could be very important in future deep neural network research,” said Alex Alemi of Google Research, who has already developed new approximation methods for applying an information bottleneck analysis to large deep neural networks. The bottleneck could serve “not only as a theoretical tool for understanding why our neural networks work as well as they do currently, but also as a tool for constructing new objectives and architectures of networks,” Alemi said.

MISCELLANEOUS

As billionaire heiress to the L’Oréal cosmetics empire, Liliane Bettencourt might have preferred to have spent her twilight years in tranquil retirement at her lavish homes in Paris, Brittany and on her private island in the Seychelles. Instead, the world’s richest woman and a pillar of polite French society, who has died at the age of 94, was caught at the centre of a national scandal and a bitter public feud with her only daughter.

Liliane was a glamorous, socialite, old-style Hollywood-star mother — she once claimed even Mao Zedong had taken a fancy to her — disappointed by a daughter she described as “always a cold child”. The daughter could not have been more different — an intellectual, brilliant pianist and author of an anthology of Greek gods. As long as André, whom they both adored, was alive, the mother-daughter tensions remained under control. But soon after he died in 2007, hostilities erupted in the open on a grand operatic scale.

Aaron Hernandez, the former New England Patriots tight end who committed suicide in April while serving a life sentence for murder, was found to have a severe form of C.T.E., the degenerative brain disease linked to repeated head trauma that has been found in more than 100 former N.F.L. players.

Researchers who examined the brain determined it was “the most severe case they had ever seen in someone of Aaron’s age,” said a lawyer for Hernandez in announcing the result at a news conference on Thursday. Hernandez was 27.

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